As we start the 3rd quarter of 2019, I thought it prudent to look at a very interesting past 3 months as well as the best first half of the year for the S&P 500 in over two decades.
2019 is off to a great start, with the S&P 500 up 18.54% through the end of June. This is obviously a welcomed sight following what was a tumultuous December 2018 (decline of 9.2% for the month), when markets sold off through the last day of year. What is remarkable about 2019, to this point, is the backdrop of a trade war with China has been present the entire time, but only in the month of May did it truly impact the markets. May was the first time since 2012 that all three of the major indices were negative in the same month, and was also the worst May since 2010. But much like December into January, once the calendar changed to June, markets began to rebound resulting in the best month of June for the Dow going back to 1938 (keep in mind we do not like to use the Dow as a true measure of the market since it is only comprised of 30 stocks, many of which have changed over time).
Over the past two months, I have fielded a number of calls from clients concerned about geopolitical issues, whether with China, Mexico or most recently with Iran. I will reiterate my position that while those issues may create short-term effects on the markets (as we saw with May) there are two fundamental data points that truly move the markets, Unemployment and Inflation. When those two begin increasing, then we begin to look at more secular moves in the markets, versus shorter-term cyclical moves. As it currently stands, neither are ticking up at unexpected rates (unemployment remains at historic lows), thus we do not feel the need to make any systemic changes to our market outlook or portfolio weightings. We remained focus on the long term, and that means that short term sell offs like May, we use as opportunities instead of reasons to take cover.
I hope this has been insightful, and if you have any questions, please feel free to contact me.